Investment Column: Icap falter won't stop it being champion

Monitise; Telecom Plus


Our view: Buy

Share price: 482.1p (+1.4p)

A rarity from Icap yesterday: figures for the first quarter for once didn't really sparkle compared with the same period last year.

But let's be fair, back then the company, which facilitates the trading of a huge range of financial instruments between banks and other financial firms, benefited from a rash of market volatility caused by the "flash crash" back in May.

And this year there were an "unusual number of bank holidays" affecting the City of London – read, the Royal Wedding – further depressing revenues. So a 4 per cent fall is of little concern and in line with expectations. Activity has also picked up since the start of June and growth has returned. That can only continue.

As central banks' views on where interest rates should be diverge, Icap will benefit from the volatility and a pick-up in derivatives trading as banks try to call the market.

And although the prevailing push for regulatory change, including demands that trading in various financial instruments become more transparent, might look like a problem for inter-dealer brokers, such steps should actually benefit Icap by driving business through its doors. In fact, companies such as Icap are looking more and more like exchanges and there has been a flurry of consolidation activity in that sector.

Interestingly, it has yet to affect Icap's sub-sector. There are five main players, although Icap is the star. If there is a push to reduce that number, its power is such that it could sit back and watch while rivals get distracted by mergers, or it may simply gobble one or two up. The former is most likely, but Icap is fleet-footed enough to be opportunistic.

Given its quality, position and record, the 13 times forecast full-year earnings that its shares trade on is undemanding. Some analysts fancy smaller rival Tullett Prebon, trading on just eight times. But then, some pundits fancied David Haye to beat Wladimir Klitschko in their recent boxing match. We all know how that one turned out. In the end, class wins.

Telecom Plus

Our view: Buy

Share price: 37.5p (+3p)

Monitise is a leading player in the fast-growing world of mobile payments, with solutions that allow lenders and the like to offer their customers ways to bank on their mobile phones. And the growth in this market was reflected in the company's pre-close update, which was published yesterday. Annual revenues, Monitise said, were set to come in at around £14m, or more than double the amount reported last year. At the same time, it reported a "strong increase in operating profit and cash generation" over the second half of its financial year. Oh, and did we mention that the group is "well positioned to double revenue again" in the new financial year?

The company is clearly on the right track. The momentum is such that we would not be surprised if it keeps surpassing analysts' hopes. Before the bears grumble, we admit that it is easy to get carried away with technology. But we would add that, unlike some so-called "stars", Monitise actually is making money.

Telecom Plus

Our view: Buy

Share price: 681.5p (-17.5p)

Telecom Plus is a multi-utility reseller, providing gas, electricity, phone and broadband to residential and business customers. And, according to investors and analysts, it has been making a rather good job of it. The group announced its first-quarter numbers yesterday, revealing that it had experienced growth in customers, distributors and services. This came alongside strong cash generation, while management forecast a significant growth in profit-ability in the first half of the year.

In all, it added 7,388 new customers, bringing the total to 378,738. The number of services was up by 38,140. This gives the company good visibility on long-term profits.

Management expects organic growth to continue increasing over the coming months, driven by new distributors. The company is also investing heavily in overhauling its online operation. But while the performance has been impressive, so has the strength in its share price, up 47 per cent over the past six weeks.

Peel Hunt has the stock on a price of 20.8 times estimated full-year earnings, which is quite punchy, but, given the visibility on the road ahead, we believe there is more to come.

Suggested Topics
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Market Risk Manager - Investment Banking - Mandarin Speaker

£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Day In a Page

Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes
Independent writers remember their Saturday jobs:

Independent writers remember their Saturday jobs

"I have never regarded anything I have done in "the media" as a proper job"
Lyricist Richard Thomas shares his 11-step recipe for creating a hit West End musical

11-step recipe for creating a West End hit

Richard Thomas, the lyricist behind the Jerry Springer and Anna Nicole Smith operas, explains how Bob Dylan, 'Breaking Bad' and even Noam Chomsky inspired his songbook for the new musical 'Made in Dagenham'
Tonke Dragt's The Letter for the King has finally been translated into English ... 50 years on

Buried treasure: The Letter for the King

The coming-of-age tale about a boy and his mission to save a mythical kingdom has sold a million copies since it was written by an eccentric Dutchwoman in 1962. Yet until last year, no one had read it in English
Can instilling a sense of entrepreneurship in pupils have a positive effect on their learning?

The school that means business

Richard Garner heads to Lancashire, where developing the 'dragons' of the future is also helping one community academy to achieve its educational goals
10 best tablets

The world in your pocket: 10 best tablets

They’re thin, they’re light, you can use them for work on the move or keeping entertained
Lutz Pfannenstiel: The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents

Lutz Pfannenstiel interview

The goalkeeper who gave up Bayern Munich for the Crazy Gang, Bradford and a whirlwind trawl across continents
Pete Jenson: Popular Jürgen Klopp can reignite Borussia Dortmund’s season with visit to Bayern Munich

Pete Jenson's a Different League

Popular Klopp can reignite Dortmund’s season with visit to Bayern
John Cantlie video proves that Isis expects victory in Kobani

Cantlie video proves that Isis expects victory in Kobani

The use of the British hostage demonstrates once again the militants' skill and originality in conducting a propaganda war, says Patrick Cockburn
The killer instinct: The man who helps students spot potential murderers

The killer instinct

Phil Chalmers travels the US warning students how to spot possible future murderers, but can his contentious methods really stop the bloodshed?
Clothing the gap: A new exhibition celebrates women who stood apart from the fashion herd

Clothing the gap

A new exhibition celebrates women who stood apart from the fashion herd
Fall of the Berlin Wall: Goodbye to all that - the lost world beyond the Iron Curtain

The Fall of the Berlin Wall

Goodbye to all that - the lost world beyond the Iron Curtain